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AMERICAS NEWS: Recurring themes

While the Big Apple was knocked out by a hurricane a week prior and hit with flight-cancelling snowfall the very night before, such weather conditions fortunately had little bearing on the attendance, or mindset, of delegates at the PERE Summit: New York 2012 held on November 8 and 9.

Up-and-coming managers and strategies got the most airplay at the two-day event. Real estate emerging managers, for example, was the focus of one of the best-attended panel sessions. Participants said the challenge for general partners was investors needed more time to ‘feel comfortable’ with new managers. LPs were also demanding greater transparency such as the sharing of five-year business plans.

Terry Ahern, co-founder of real estate consulting firm The Townsend Group noted it was especially tough for emerging managers to raise capital because of the tendency of investors to adhere to existing relationships when making new commitments. “This is a sticky business, and that’s also preventing new entrants from coming in,” he said. The barriers to entry and difficulties in performance for some emerging managers were unfortunate, given the fact that new firms typically outperformed existing ones by 300 basis points or greater, it was argued.

For emerging managers and others, separate accounts have been an alternative to raising capital through funds. Separate vehicles have become more popular, but not because investors want to be able to control every investment decision; rather, they want to control the flow of capital to an investment depending on how well it performs, said Ahern.

That said, not everyone saw separate accounts as being a good fit. Speaking on a panel following Ahern’s keynote interview, Brahm Cramer, co-head of the real estate group at AllianceBernstein, said his firm didn’t necessarily agree with the investment judgment behind a number of separate account strategies, and that being tied to making certain types of deals based on an investor’s strategy impeded a new fund manager’s ability to build a business.